Training Debt Free Children
- Monday, August 13, 2012
Editor's note: This article originally appeared in the August 2012 edition of the River Reader's Journey. Used with permission.
In Proverbs 22:7, God warns us of the dangers of debt: “Just as the rich rule the poor, so the borrower is servant to the lender” (NLT). In 2008, many Christian families realized too late the truth in those words. With the recent economic crisis, our country saw the tragic effects of mounting debt as families lost homes and jobs. For many Americans, this was a call for drastic change, and families began to pare back spending and look for ways to reduce their debt. But are we teaching our youth to do the same? When we drop our teenagers off at college, are they prepared to handle the onslaught of credit card offers they'll receive?
By training delayed gratification, talking openly about the family budget and providing opportunities for children to practice money-management skills, we encourage them to understand the value of a dollar. Similarly, by allowing children to learn from their mistakes, parents can help youth stand strong against the rising surge of materialism and its often devastating consequences.
Train delayed gratification early and consistently
“The plans of the diligent lead to profit as surely as haste leads to poverty” (Proverbs 21:5 NIV).
In our instant-messaging, sensory-saturating culture where everything is but a click of the mouse away, teaching our children to wait can be difficult. But encouraging them to consider long-term consequences and goals helps prevent impulse shopping and costly decisions that could land them into debt.
According to Anthony Brown, Certified Financial Planner and Advisor with Montgomery’s Ronald Blue and Co, many families have more debt than assets. “Most people today define financial success as being able to have whatever they want when they want it,” he said. “But is that the true measure of financial success? I believe the biblical view of financial success is that of a mature financial steward. Financial maturity comes about over time as we learn the basic principle of delayed gratification, primarily giving up today’s desires for future benefits.”
For Mr. Brown, this training begins when the children are young and involves all areas of their children’s lives. “My wife and I homeschool our three youngest children. They each have certain school related assignments that must be completed prior to play outside. In addition, each [child] is responsible for household chores that are to be done before moving on to other activities.”
Openly discuss the family budget
Training delayed gratification is a great start, but it is not enough. Children need to understand why patience and perseverance is important. They need to learn to view things from a long-term perspective. At age eighteen, a job paying $10 an hour may seem like a lot of money. Once our youth see the cost of maintaining a home and raising a family, however, this view is likely to change.
Michael Harris, founder and President of Montgomery’s Harris Family Capital Management, believes family financial discussions are an important aspect of promoting value-based and purpose driven financial planning. “I encourage my clients to begin having values conversations with their children as soon as they show some understanding of the four basic components of financial management: earn, spend, save, give,” Mr. Harris said.
More than that, involving your children in your budgeting discussions allows them to see financial principles lived out. “The goal should be to provide the example then create an environment where children can apply what they learn,” said Mr. Brown. “We provide a good opportunity for long-term success when we model financial stewardship. Communicate the basics. Children should have an age-appropriate understanding of cash flow coming in and out. Consider including your children in discussions about how much the family gives charitably, how much is paid in taxes, debt repayment, basic living expenses, and saving for the future.”
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